Mon | Jan 22, 2018

CWJ shareholder takes telecom to court

Published:Wednesday | January 3, 2018 | 12:00 AMSteven Jackson

A Jamaican shareholder is trying to sue Cable & Wireless Jamaica (CWJ), claiming that financial transfers to its British parent company, Cable and Wireless Communications Plc, have weakened the local telecoms over time.

Eric Jason Abrahams wants US$500 million in assets repatriated back to CWJ's books, according to his legal team, and he is seeking permission from the Supreme Court to proceed with his case.

Such a lawsuit would improve the value of the company, argued Abrahams' team from law firm Hart Muirhead Fatta, which filed court papers last November.

The lawyers only spoke of the court action after Gleaner Business reported online at the weekend that CWC CALA Holdings had made a mandatory offer of $1.45 per share to CWJ minority stockholders, who have up to January 31 to accept.

CWC Plc, CALA Holdings and CWJ are all ultimately owned by Liberty Global, which acquired the British telecoms and its regional holdings in 2016.

Asked about the offer, Abrahams' lawyers said that factoring the US$500 million, the value of the CWJ stock would be multiples of the $1.45 per share offer price.

Last Saturday, racing for time, the law firm sent a letter to the Jamaica Stock Exchange alerting Managing Director Marlene Street Forrest to the court action and knocking the Cable & Wireless Jamaica board for not advising the market of the legal proceedings.

"If the derivative claim is successful, the directors and/or CWC UK will likely be required to pay hundreds of millions of US dollars to CWJ," wrote Hart Muirhead Fatta in the letter seen by Gleaner Business.

"Quite clearly, this will materially affect the value of the company's shares. In our opinion, the existence of a lawsuit designed to restore hundreds of millions of dollars of value to a public company is highly material and price sensitive - yet, CWJ has not so far seen fit to disclose the information to the market," the law firm said.

"The derivative claim for which our client is seeking leave, aims to recover for CWJ in excess of US$500 million in real assets and value, which, from our instructions, appear to have been unlawfully transferred out of CWJ for the exclusive benefit of its parent company, that is at the expense of minority shareholders, through a variety of mechanisms, including sophisticated transfer pricing schemes within the Cable and Wireless group and the improper conveyance of assets under the guise of a 'merger' with Flow Jamaica," stated the letter from Hart Muirhead Fatta.

The court case has already had one formal hearing before the Supreme Court.

Abrahams, who owns 50 million CWJ shares, has been complaining about the stewardship of the telecoms since January 2017, according to the claim filed in the Supreme Court, in which he also accused the CWJ board of rubber-stamping decisions for the benefit of CWC.

CWJ operates largely in the red and was $57 billion in debt to CWC at its last quarterly disclosure for the period ending September 2017.

CWC CALA and affiliate Kelfenora Limited together hold 82 per cent of CWJ, which trades as Flow Jamaica.

Through the mandatory offer on Friday, the international telecoms aims to acquire three billion CWJ shares held by minority owners.

CWJ minority shareholders had been asking for Liberty to make them an offer, after the company fully acquired Cable & Wireless Communications.

The issue was taken up by regulator, the Financial Services Commission, which backed the minority owners' argument that a mandatory offer for all shares should have been made by Liberty, even though the company had acquired ownership of CWJ indirectly.

However, that case has been cloaked by legal action, under which the FSC said it was barred from commenting. It's unclear whether the current offer through CALA indicates a resolution of that court case.

CWJ declined to comment on the Abraham claim.

"We appreciate the opportunity to respond. However, this is a matter before the court. As such, any discussions or comments at this time would be inappropriate," the telecoms said.

steven.jackson@gleanerjm.com